Trump demands aides pump up anti-China tariffs  3/13/2018 6:32:32 PM   Michael Crowley
Donald Trump is pictured. | AP Photo

President Donald Trump is getting ready to crack down on China.

Trump told Cabinet secretaries and top advisers during a meeting at the White House last week that he wanted to soon hit China with steep tariffs and investment restrictions in response to allegations of intellectual property theft, according to three people familiar with the internal discussions.

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During the meeting, which hasn’t been previously been reported, U.S. Trade Representative Robert Lighthizer presented Trump with a package of tariffs that would target the equivalent of $30 billion a year in Chinese imports. In response, Trump urged Lighthizer to aim for an even bigger number — and he instructed administration officials to be ready for a formal announcement in the coming weeks, according to two people involved in the administration’s trade deliberations.

That sent senior officials at the White House, Treasury Department, State Department, Justice Department, the Office of the U.S. Trade Representative and other key agencies scrambling this week to finalize the proposal. Although the details are still in flux, aides said the administration is considering tariffs on more than 100 Chinese products ranging from electronics and telecommunications equipment to furniture and toys.

Those tariffs are expected to be rolled out as soon as next week, the officials said, adding that the timing could slip. The pending announcement comes after Trump unveiled steep duties on steel and aluminum imports, infuriating Republicans in Congress and many of his own aides.

The Office of the U.S. Trade Representative and the White House declined to comment, and the Treasury Department did not immediately comment. “We don’t comment on internal meetings, but no final decisions have been made on content or timing,” said a White House official.

The president has long promised to get tough on trade, but the issue has provoked fierce division among his advisers. Now, as Trump looks ahead to the midterms and his own reelection campaign, the president has told people close to him that he will no longer allow his staff to stop him from moving forward with policy ideas he strongly supports.

National Economic Council Director Gary Cohn, who strongly opposed the steel and aluminum tariffs, announced last week he will soon resign, and Secretary of State Rex Tillerson, who also privately expressed skepticism of Trump’s trade proposals, was fired on Tuesday. “I’m really at a point where we’re getting very close to having the Cabinet and other things that I want,” Trump said Tuesday.

Tariffs on China's products could provoke potentially disastrous retaliation against U.S. exporters, including U.S. farmers who rely on the market in China as a major destination for soybeans, pork and other commodities, experts have warned.

The go-it-alone approach could also further stoke tensions with U.S. allies that are also opposed to China’s trade policies, but may view the action as counterproductive to a broader solution.

But tough action against China could earn more support in Congress than the recent steel and aluminum tariffs, which Republican lawmakers condemned as overly broad and harmful to allies. However, lawmakers could still view any China action with skepticism given the chaotic way in which tariffs were rolled out last week.

In addition to the tariffs, the Treasury Department is working to finalize restrictions on Chinese investments as part of the upcoming trade action, although they will likely be introduced only “in concept” as officials continue to consider how broad any action should be, according to an administration official familiar with the planning.

The work on the investment restrictions is focused on making the action as legally defensible as possible, not only at the World Trade Organization but also in accordance with the U.S. Constitution and U.S. laws, the official said.

The Treasury, State and Justice Departments have all insisted on a thorough review of the investment restrictions to avoid a repeat of the fallout from Trump’s original travel ban, which was knocked down by U.S. courts, the official said.

The administration is also considering restricting visas for Chinese citizens or tightening controls on exports of certain goods or technologies that have both military and civilian uses, two of the administration officials said.

The visa restrictions could hit Chinese students going to school in the United States, especially graduate students in science and technology programs, as well as other Chinese nationals working in sensitive jobs, such as at national laboratories. But some administration officials have raised objections to the visa restrictions, and it’s unclear whether they’ll be included in the final package.

The trade crackdown against China would represent Trump’s biggest trade action yet, as he tries to take on Beijing’s massive industrial policy, which often results in U.S. corporations losing valuable technology to Chinese state-controlled companies.

The move would also come only weeks after Trump inflamed trade tensions with allies and foes alike by slapping tariffs on imports of steel and aluminum.

“Steel tariffs are one thing. Taking on the entire Chinese industrial policy apparatus that is designed to suck technology out of the world is another,” said one outside adviser to the administration who has been briefed on the planning and was not authorized to speak on the record.

The Office of the U.S. Trade Representative has calculated tariffs equivalent to about $30 billion per year, which it says represents the market value of technology that U.S. companies are forced to hand over each year with little to no compensation to do business in China, according to two of the administration officials helping plan the action.

The officials added that the administration looked to the Made in China 2025 plan — a coordinated industrial policy Beijing is using to upgrade the country’s manufacturing sector — as a guide when crafting the tariffs.

Administration officials are still debating whether to roll out the tariffs in phases, one of the officials said.

“I think China is going to have to respond. The question is, are they going to do that in a targeted way or are they going to escalate dramatically,” said Matthew Goodman, a senior adviser and expert on Asian economics at the Center for Strategic and International Studies.

Goodman, who served as a White House adviser to Presidents Barack Obama and George W. Bush, said the proposed tariffs are “not wildly out of proportion with the problem.”

A U.S. International Trade Commission investigation in 2011 found that intellectual property theft cost U.S. producers nearly $26 billion in losses in 2009 on copyrighted material alone. Another study from the U.S. software industry in 2011 put software theft losses as high as $60 billion.

“After the inevitable explosion you’re going to have over this, it’s possible that this could bring people back, quietly, to the table over time, but I wouldn’t predict that in the short term,” Goodman said.

In addition to any major retaliation, China will also most likely challenge the tariffs at the World Trade Organization. The United States would likely run afoul of its obligations at the global trading group, where Washington committed to keep its tariffs under a certain level, including with China.

Still, the outside adviser said the Trump administration “seems hell-bent on going it alone” against Beijing, rather than organizing a coordinated approach with other trading partners or through a global forum like the WTO.

The European Union, Japan and other close U.S. economic allies similarly view China’s trade transgressions — theft of intellectual property and technology among them — as damaging to the global trading system.

But unilateral tariffs against Beijing raise “some serious questions about strategy” and could provide further cover for China as the world focuses on U.S. action as a brazen violation of global trade rules, the adviser said.

The move is related to an order Trump signed in August that directed Lighthizer to open an investigation into China under Section 301 of the Trade Act of 1974 for violations of U.S. intellectual property rights. Officials have been examining whether any of China’s laws, policies, practices or actions force American companies to transfer valuable technology to compete in the market or otherwise fail to adequately protect intellectual property rights.

The uncertainty surrounding the steel and aluminum tariffs and other trade issues, such as the ongoing NAFTA negotiations and the investigation into China’s industrial policies, are a “possible headwind” that could undo many of the benefits of tax and regulatory reform, Joshua Bolten, president and CEO of the Business Roundtable, told reporters Tuesday.

“The sooner that the administration is able to clarify what it is doing on steel and aluminum and tariffs and the better the administration is able to do in pursuing a coherent strategy in addressing unfair practices around the world, that's rules-based and consistent, the better it will be,” Bolten said.

Doug Palmer contributed to this report.

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